February 9, 2018

Opportunity Zones and Census Data: Understanding New Guidance from the Treasury (Updated)

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Opportunity Zones Infographic

The growing awareness of the Opportunity Zones Program has left many with questions regarding geographic eligibility for designation as Opportunity Zones. This post provides additional details regarding the use of census data to determine census tract eligibility criteria. This information is based on our current understanding of the legislation as of the IRS guidance on February 27, 2018 and will be updated to reflect future guidance from the US Treasury Department.

In addition to this post, be sure to check out our Opportunity Zones landing page for the latest information about the program and our Opportunity Zone Eligibility Tool. This tool allows users to:

  • Determine eligibility using both 2015 and 2016 ACS data and download the data;
  • Overlay federal program data to assist with designation strategies;
  • As of our February 28 update, the tool also includes Puerto Rico.

Determining Eligibility from Census Data: Which Year to Use?

With the guidance released on February 8, 2018, the IRS has clarified two important issues regarding the data that states should be using to designate Opportunity Zones – which tracts are eligible for designation and how many can be designated.

First, the IRS stated that Opportunity Zone designations made on the basis of 2015 5 Year American Community Survey (2015 ACS) data will be accepted using a “safe harbor” rule – meaning that the designations will not be rejected on the grounds that it is no longer eligible under more recent census data. On the other hand, they will consider a designation made on the basis of 2016 5 Year American Community Survey (2016 ACS) to be valid, as long as it is supported with the appropriate data.

Update 3/5/18: We have been informed by the CDFI Fund that the use of 2016 ACS data extends only to the designation of additional Low-Income Communities and not to non-Low-Income Community contiguous tracts (see the graphic below). Although the guidance posted on the CDFI Fund’s Opportunity Zones Information Resource page has not been updated to reflect this distinction, the CDFI Fund plans to include this guidance in the information being sent to governors’ offices to complete their tract nominations. We have also updated our Opportunity Zones Eligibility Tool along and downloadable data accordingly.

Opportunity Zones Eligibility Matrix.jpg

How Many Tracts Can States Designate?

In addition to the guidance above, the IRS stated that the total number of Opportunity Zones that states can designate must be based only on the 2015 ACS. So, while choosing to work with the 2016 ACS data can add some additional flexibility in which tracts are eligible, it will not affect the total number of tracts that can be designated.

Update: Because the number of Low-Income Communities in the CDFI Fund’s dataset was updated on February 27, 2018, states should re-check the number of tracts they are able to designate, as this number may have changed.

The IRS guidance also specifies that states should round up when calculating the number of tracts to designate and the number of designated tracts that are eligible due to contiguity with Low-Income Communities. For example, a state with 101 Low-Income Communities would be able to designate 26 tracts (or 25 percent, rounded up) as Opportunity Zones. Of those 26 communities, up to two tracts (5 percent rounded up) could be designated as eligible based on contiguity with a Low-Income Community. 
 

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